Diamond Foundry Hikes Output, Prices

RAPAPORT... Diamond Foundry is increasing its production more than tenfold
and raising wholesale prices 15%, as it predicts an uptick in demand for
lab-grown diamonds.

The company believes there is a shortage of
synthetic-diamond supply while consumer interest in the product is rising. It
plans to raise production to at least 1 million carats of rough per year,
boosted by a new factory in Washington state, Diamond Foundry CEO Martin
Roscheisen told Rapaport News Tuesday.

“After careful monitoring of the market situation over the
past months, we see demand increasingly outpacing supply,” the San
Francisco-based company said in a note on its website December 21. While more
people want lab-grown diamonds than before, “the corresponding supply is not
increasing at the same rate,” it added.

Diamond Foundry, which is backed by Leonardo DiCaprio, began
production at its new “MegaCarat” factory in the city of Wenatchee in November,
and expects to reach its target rate of 1 million carats per year by the end of
2019. The company’s current annual production capacity is 100,000 rough carats,
it said.

The company also announced an average 15% increase in the
wholesale prices for its rough and polished diamonds, effective January 1,
citing the purported supply shortfall. While it is not actively raising its recommended
retail prices, its stones are becoming more expensive at the retail level due to demand, a spokesperson explained.

Its assessment of the market contrasts with that of
analysts, who estimate that prices of lab-grown diamonds fell in 2018. Generic 1-carat lab-grown
diamonds were selling at an average discount of 42% relative to natural stones
in late November 2018 compared to 29% in January, driven by improvements in production
capabilities, analyst Paul Zimnisky said in a report. Retail prices have nearly
halved in the past two years, while wholesale prices have dropped by two thirds,
Bain & Company noted in a December report. Global output of polished
synthetics is growing by 15% to 20% per year as manufacturing costs fall, Bain
added.

De Beers’ launch of its Lightbox lab-grown-diamond
jewelry brand last year also put pressure on prices, as the jewelry sells at retail
for a standard $800 per carat, regardless of size, well below the prices many
synthetics companies had been offering.

Diamond Foundry’s suggested retail
prices are $250, $750 or $1,000 per carat for lower-end or “program” diamonds,
depending on size. Its “certified uniques” — those generally above 0.85 carats
— retail at a 55% discount to the Rapaport Price List, it said. Major
e-commerce retail sites such as James Allen and Blue Nile list their equivalent
natural diamonds at 30% off the Rapaport sheet, it claimed.

Diamond Foundry admitted there had been some price fluctuation this year, but still expects market dynamics to work in its favor.

“Prices fell in August, but there is presently a massive
shortage in the supply of lab-grown diamonds, which is causing a price
increase,” Roscheisen said. “We believe this shortage will persist for several
years.”